It was the final blow to Murray Goulburn’s ambitions to create a national diary champion and send the Canadians packing.

Commercial interests were always going to triumph over ideology and
Bega Cheese
had no choice in the end but to capitulate and sell its 18.8 per cent stake in
Warrnambool Cheese
and Butter to Saputo.

The move gives Saputo a 47 per cent stake in Warrnambool, putting it within a whisker of control of the company which has been at the centre of an extraordinary three-way takeover tussle. It is inevitable that the hedge funds and institutional investors with stakes in the target will follow suite, easily allowing the Canadians to get the bid across the line.

Bega executive chairman
Barry Irvin
said it was a tough decision as he would personally liked to have seen the dairy processor stay in Australian hands. But the uncertainty generated by the drawn-out regulatory process Murray Goulburn was forced to navigate gave Saputo the box seat at the end of the day.

Saputo offered $9.20 a share if it acquired more than 50 per cent of Warrnambool, lower than Murray Goulburn’s offer of $9.50 a share. But this would raise to $9.60 a share if it gets to more than 90 per cent.

Saputo’s offer, due to expire on Wednesday next week, is automatically extended by another two weeks if it gets to 50 per cent.

The focus now is on what will the second-place holder Murray Goulburn will do with its 17.7 per cent stake. There is no question the Bega’s decision to hand its stake to Saputo is the final blow in the long-running cheese wars. Murray Goulburn chief Gary Helou would be wise to cash in the profit he has made on his investment in Warrnambool and sell up which is the most likely outcome.

Murray Goulburn cannot accept into Saputo’s bid until it hits more than 50 per cent. Once that happens, it will likely withdraw its offer.

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While a final decision has not been made it is understood Murray Goulburn has no interest in hanging onto a blocking stake, something another shareholder Kirin Holdings’ Lion is expected to do. Helou will be seeking to leverage the relationships the co-operative has made with farmers and other shareholders throughout the takeover process and try and win new suppliers.

In a way everyone walks away a winner. Murray Goulburn, which did not kick off the bidding in the first place, walks away with a profit on its shareholding. Its dream of creating a national dairy champion has just slipped further from its grasp though.